2016-12-05

1. The EU Teeters; 2. Trump Effect & Expectations; 3. Why Hillary Lost.1. The EU TeetersFeature • The European Union (EU) teeters on the 'No' vote win in the referendum in Italy on Sunday (Nov 4), and the resignation of Italian Prime Minister Renzi. Austria rejected anti-immigrant populist Hofer (Freedom Party)in its Presidential Election on Sunday, but"[w]hile the runoff for the [Austrian] presidency was close, polls in recent weeks have shown that Mr. Hofer’s Freedom Party remains Austria’s most popular by a large margin. The party drew the support of 35% of those surveyed in a Gallup poll last month, well ahead of the second-place Social Democrats with 27%"--WSJ.com.Political instability risks in Italy, Europe's fourth largest economy, have already triggered market reaction before the vote “The Italian banking industry has huge problems linked to their businesses, not to the referendum,” said Francesco Confuorti, the CEO of Advantage Financial SA, a Milan-based investment firm. "This is a resolvable situation, but we shouldn’t expect that it will be resolved," said Pitt Miller, analyst at Janus Capital Group in Denver. "That is so utterly frustrating."--Bloomberg.com

Why the Italian referendum matters:

Video above published by FT.com Nov 29, 2016.

The European Central Bank (ECB) is worried about political uncertainty risk within the eurozone, with the constitutional referendum in Italy on Sunday and elections in France and Germany in 2017. The worst-case scenario could reignite the 2009 eurozone debt crisis, says the ECB, which has also warned that some stock markets could be heading for sharp falls. "Valuation measures... are in some regions hovering at levels which, in the past, have been harbingers of impending large corrections."--BBC.com. SeeECB Financial Stability Review, November 2016 (pdf).

Brexit, Trump, Le Pen and the rise of the right: the anger goes global | Independent.co.uk: "Across the world, rage against the ‘liberal elite’ fuels reactionary, populist movements ..."
Just days after Germany's Angela Merkel announced she would seek a fourth term as German Chancellor in September, 2017, she said she expects to deport 100,000 migrants from Germany next year in a sharp reversal of policy. The Chancellor, who welcomed “no upper limit” of migrants from the Middle East, Asia and Africa last year, said Saturday, 27 Nov 2016: “It can not be that all the young people from Afghanistan come to Germany. The most important thing in the coming months is repatriation, repatriation and once more, repatriation."--Breitbart.com. According to Handelsblatt.com, Merkel said she expects a third of the deportations to be forced or compulsorily, and around 60,000 migrants to return to their home nations via voluntary repatriation programs.

French Presidential Election Poll - First Round If Valls Is Socialist Candidate

Hollande's Decision in France Not to Seek Re-election Reflects Broader Upheaval: Hollande is the first President in modern French history not to run for re-election. In the Netherlands, far-right leader Geert Wilders is polling strongly ahead of the 2017 elections.

"On November 8, Donald Trump was elected President of the United States. As the election returns came in, US equity futures plummeted, pointing to the possibility of a sharp decline in equities when the market opened the next day. But when the market actually opened on November 9, something very different occurred: US stocks soared ..."

But Are Rising Expectations Excessive and Markets Due For A Correction?

Blackstone CEO on Job Growth Under President Trump (Nov 16, 2016, video above): Stephen Schwarzman, CEO and Co-Founder of The Blackstone Group, shared his view with WSJ.com financial editor Dennis Berman that a reduction in the regulatory burden in Washington under President-elect Donald Trump will lead to increased economic growth.OECD says Trump election points to US growth boost: President-elect Donald Trump's big-spending plan and tax cuts are expected to help double the US economic growth rate by 2018, the Organisation for Economic Cooperation and Development (OECD) said in its semi-annual report, forecasting the US economy will grow by 2.3 percent in 2017 and 3.0 percent in 2018, revising OECD's earlier lower forecast, and contrasted against this year's gross domestic product growth of 1.5 percent. The Paris-based OECD also said global growth will benefit if the US president-elect's spending and tax plans boost domestic investment and consumption. See Donald Trump’s infrastructure plans win backing from OECD | FT.com and OECD Lifts Global Growth Forecasts on Expected Trump Stimulus | Bloomberg.com.

Chairman of Top Nordic Bank Predicts Better Times Under Trump: Bjorn Wahlroos, the chairman of Nordea Bank AB, said in an interview in Stockholm, that Donald Trump’s election win is good news for the U.S. economy, thanks to Trump's pledge to deliver tax cuts and deregulation.--Bloomberg.com.Bloomberg.com also reported that with stocks at record highs, Nicholas Colas, chief market strategist at Convergex, sees the makings of a multi-year rally for stocks:

"... in reality the whole framework of market expectations has shifted, and rapidly at that. Investors will have to adapt to a world where the companies they own do some investing as well rather than hand back all their earnings in buybacks and dividends. And sectors like Financials and Industrials, long forgotten, may once again show a cyclical resilience out of pace with their near term fundamentals. One thing is for sure: the recent rally is more than just an uptick in asset prices ..."

Goldman Sachs Says Trump's Presidency Will Benefit Stocks in Almost Every Sector: "... Goldman certainly isn't the first to hail the potential benefits of a Trump presidency. Dubravko Lakos-Bujas and Marko Kolanovic, quantitative analysts at JPMorgan Chase and Co., also wrote that many of Trump's policies would be "pro-growth," even while uncertainty about specifics remains high. They wrote this week that if the campaign promises that have the potential to stimulate growth get implemented, the S&P 500 could see as much as $20 in additional earnings-per-share growth over the next few years ..."--Bloomberg.com Nov. 30, 2016.

Steven Mnuchin Going to Issue50 or 100-Year Treasurys? President-elect Donald Trump‘s choice for Treasury Secretary is already moving markets, saying “we’ll look at potentially extending the maturity of the debt because eventually we are going to have higher interest rates and that is something this country is going to need to deal with,” adding, he may look at issuing debt that doesn’t come due for as long at 50 or 100 years, among other options (the longest-term U.S. Treasury bonds are currently 30-year bonds)--WSJ.com.

Even conservative economist andTrump economic adviser Stephen Moore is capitulating to the largely non-ideological, populist economic agenda of Trump--Moore traveled around the Rust Belt states in support of Trump during the campaign, and after witnessing Trump’s stunning victory, he told Republican House members--

"It [Trump's campaign] turned me more into a populist ... having spent the last three or four months on the campaign trail, it opens your eyes to the everyday anxieties and financial stress people are facing ... I’m pro-immigration and pro-trade, but we better make sure as we pursue these policies we’re not creating economic undertow in these areas." Referring to Trump’s proposed massive infrastructure program,Moore, who has worked for the ultra-conservative Heritage Foundation, said,“I don’t want to spend all that money on infrastructure, I think it’s mostly a waste of money but if the voters want it, they should get it. If Trump says build a wall then he should build a wall. If Trump says renegotiate TPP [the Trans-Pacific Partnership trade deal], he should renegotiate TPP.”--TheHill.com.

Even President Obama briefly stepped aboard the Trump Train post-election, saying in Athens: "The global path of globalization demands a course correction ..."--PRI.org.

• WaPo clickbait: Trump’s Pennsylvania lead shrinks | WashingtonPost.com--recounts underway in Pennsylvania, Michigan, and Wisconsin arenotexpectedtochange the outcome in any of the three states--a fact the Washington Post conveniently buried near the end of its article.

• CNN Apologizes to Trump after CNN Crew caught joking about his plane crashing:“An unfortunate and inappropriate remark was made by one of our producers off camera yesterday," CNN said in a statement. "We have apologized to the Trump transition team, and the producer has been disciplined.”--HollywoodReporter.com

Above: 2016 US Presidential Election Map By County & Vote Share: Clinton (Dem) Blue; Trump (Rep) Red. The map explains why Clinton lost the election despite winning 48% of the reported popular vote to Trump's 46.3% according to the latest results. Clinton won only 232 electoral votes, while Trump won 306 electoral votes (270 electoral votes are needed to win the election). Why the disparity in electoral votes when the popular vote was so close? Clinton's popular vote was very concentrated in only a few states whereas Trump’s votes came from a wide enough geographic area to capture the Electoral College. Overall, Trump won approximately 2,600 counties to Clinton’s 500, or about 84% of the geographic United States. Clinton won 88 of of the 100 largest counties (including Washington D.C.), but the Electoral College system, established by Article Two of the United States Constitution, rewards a candidate who has a wide geographic appeal among the fifty states. For example, Trump spent no time nor money in California during the general campaign, allowing Clinton to "run up" the vote there and win the state by a margin of 2-to-1, a winning margin of 4,016,025 votes. In fact, take away Hillary's winning margin in just California (4,016,025), and Trump wins the national popular vote by 1,708,876 votes.

But Trump, instead of wasting time and money in California (Clinton overall had more than twice the money Trump did, thanks to her "friends" in Hollywood, Washington, New York, and Silicon Valley), focused on winning the states that would deliver him an electoral vote victory. Meanwhile, the Clinton campaign believed the "fake news" that the establishment media and their pollsters were spewing, that Hillary was a shoo-in to win the election, she didn't even need blue-collar workers' votes in the Rust Belt, and as a result she never campaigned in Wisconsin, abandoned traditional working-class Democratic Party constituencies in places like Pennsylvania and Michigan, and instead, wasted time and money campaigning in places like Texas and Georgia. You know the rest. (Also note that Alaska in gray above, voted for Trump.)What will haunt Democrats for years to come, is the fact that Hillary could have won the Presidential election had she just not lost Pennsylvania, Michigan, and Wisconsin, three traditionally Democratic states in Presidential elections (Obama won all 3 in both 2008 and 2012). Yes, Hillary lost Florida, North Carolina, and other states where she actually campaigned and spent money, but she didn't need Florida, North Carolina, or any of those other states she lost, had she just held the Blue Wall states of PA, MI, & WI. In the end, Hillary won the money race and she had the media establishment in her corner, as well as Wall Street, K Street, Silicon Valley, and Hollywood, but she lost the election because her campaign became over-confident, even arrogant, and felt "entitled"--those same things that led to her email and Clinton Foundation pay-to-play scandals--that's why Hillary and her Clinton campaign organization, and Clinton supporters, were in such shock and disbelief on election night. Hillary couldn't even emotionally handle showing up to concede at the Javits Center election night, but instead, sent John Podesta who told everybody to "go home."-- John Poole, Editor, Domain Mondo